UPDATE 1-IMF head says Greek exit a possibility-newspaper

Reuters Staff

2 Min Read

(Adds further comments from interview, background.)

DRESDEN, Germany, May 28 (Reuters) - The head of the International Monetary Fund told a German newspaper that a Greek exit from the euro zone was possible but probably would not signal the end of the euro currency.

A comprehensive solution to Greece’s debt problems was “very unlikely” in the next few days, IMF Managing Director Christine Lagarde told the Frankfurter Allgemeine Zeitung, according to an advance extract of an interview due to be published on Friday.

That contradicts statements from Greek officials, who have said they believed they are close to a deal.

“A Greek exit is a possibility,” Lagarde told FAZ. Such a step would “not be a walk in the park”, she said, but would “probably not” mean the end of the euro.

After positive signals from Athens 10 days ago, she said, Greece’s EU and IMF lenders had realised a lot of work remained to be done.

Greece’s government hopes to reach an agreement with its lenders on a cash-for-reforms deal by Sunday. But after four months of tortuous negotiations no breakthrough is in sight. Without a deal, Athens risks default or bankruptcy in weeks.

Lagarde ruled out granting further loans to Greece without a clear reform agreement.

“We have rules, we have principles. It cannot be a half-baked overhaul of the programme,” she told the paper, adding this was not something that could be done overnight.

She told the paper that she did not believe it was the IMF’s responsibility to keep Greece in the euro zone. It was up to Europe to take precautions if the EU wanted to avoid the threat of a bankruptcy, she said.

Once Greece has fulfilled its conditions, she said, the euro states and the European Central Bank could give the Greeks “a little bit of breathing space”, pointing to the ECB’s emergency funding programme for Greek banks. (Reporting by Michelle Martin and Paul Carrel; Writing by Caroline Copley; Editing by Larry King)